US Airways Group (LCC) has been performing well, up nearly 19 percent on the year and trading at its highest level in over four years. On February 14, US Airways announced it would merge with American Airlines to create what will be the world’s largest carrier.
MERGER NEWS
US Airways CEO Doug Parker and American Airlines’ Chairman Tom Horton testified before the Senate last week, but outside concerns over the impact of the $11 billion merger on jobs and passenger fares, few serious objections were raised. Parker, who will remain CEO of the combined carriers, offered encouraging comments as to the labor integration when speaking later last week in Charlotte, NC, what will be the combined carriers largest hub. The airlines have a combined total of five unions, all of whom filed a statement of support of the merger the same day as the Senate Hearings.
BIG BOYS
Hedge funds are bullish on the stock, with BlueCrest Capital Management being the most prominent, holding a 338 million call position that comprise over half their portfolio. Other funds with long positions include Appaloosa Capital Management, Duquesne Capital, George Soros’s Soros Fund Management, and Standard Pacific Capital.
OPTIONS ALERT
Yesterday, we saw unusual options activity with 30,000 January 2015 15 calls bought for $3.80, indicative of further institutional bullishness.
MY TRADE
Buy the LCC Sept 17-19 Call Spread for $0.34
Risk: $34 per a lot
Reward: $166 per 1 lot
Breakeven: $17.34
THE GREEKS
Delta: Long
Gamma: Long
Vega: Long
Theta: Short
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